Posted
by
Cliff
on Wednesday November 08, 2006 @07:18PM
from the gnu-economics dept.

rjst01 asks: "I work for a small company that sells an advanced engineering product targeted at a small niche. We have about 600 customers worldwide and our software is available in 3 languages, soon to be 4. My boss loves the idea of Open Source, and would very much like to release our software under an open source license. But, we're unable to find a working business model appropriate to such a small customer base, that won't result in us achieving anything other than destroying our revenue stream. The fact that our software is in an obscure language (think embedded programming) doesn't help. Can anyone suggest a business model that allows us to open source our software while continuing to make a profit?"

Sell support. If you want to sell your product per see, then you can't go Open Source. Why all the ideological bullshit about Open Source ? What kind of idea behind Open Source does your boss like ? The fact that he can get free programmers ?
I doesn't work that way.
Maybe you want a shared source license with your customers.

As a programmer, it is painfully obvious to me that the people which actually wrote the software and muck with it every day will do support much better than joe average off the street. It is non-trivial to wrap your head around someone else's code.

This is one reason why the model works well not only for RedHat, but for MySQL and former JBoss, among others.

If your product is presently proprietary, what would the benefits be of opensourcing it? Seriously, Open Source != panacea. If you have a market which supports you, especially a small one, it's because nobody else as of yet has found it worth their time to come up with a solution and provide a common good. You say your boss 'likes open source' - but why? Philosophically? that's nice. Philosophy doesn't pay bills. Business models do. If it is becoming prohibitively expensive to find and attract coders who can maintain and develop for your application in this obscure language/environment, and you're attempting to leverage community talent, then perhaps you would benefit from simply porting the application to a less-obscure platform, if possible, so as to broaden your talent pool.

The problem of finding a business model which utilizes open source is presently confounding many companies, many of them very large ones. Open source is very, very useful at reducing the costs of doing business - it's not so clear-cut as to how it makes one money directly.

This question is somewhat incomplete. Why do you 'like' Open Source, and what motivates you to release your software? Unless we know that, there's no way to determine what sort of business model might be appropriate. What are you trying to get out of releasing it? Warm fuzzies? If so, then sorry, you're just going to be committing business suicide. If there are specific gains you're looking to make, then perhaps.

1)You say embedded programming. Are you selling the hardware as well? If so, the software is a vehicle to sell your hardware. You can easily make it open source and make money via hardware improvements. You may even make more this way, as you'll need less software development time (if people contribute back)

2)Sell feature prioritization. If you're really a small niche selling engineering equipment, chances are your users have very advanced needs. Offer to add features for a price. These features could either be exclusive (the user pays for you to develop it only for them) or inclusive (the user pays for it to be released globally) with sliding scales for each. This is on top of support and the usual open source models.

You got modded +5 Funny for that, but actually it's a viable business model. Worked for YouTube.

If a small fish does something that a massively larger fish is a. interested in or b. threatened by, a good way to make a good buck is to simply sell out to the bigger fish. A lot of startups do some initial research, maybe prototype a few things... and then look for a "partner."

If you're making money at the moment without selling support then congratulations, you're one of the few companies that do, don't rock the boat and keep doing exactly what you're doing now. Chances are you're fucked anyway, but at least the gravy train will last for a while. If, however, you're like 99% of companies out there and make your money from selling support, opening your source code will not change the bottom line one bit.

Open source can work if customers are interested in financing features and 3rd party coders are interested in adding to the product. The idea being that you can usually make more money with a software product than from a software product and there are more parties interested in the development of the product. This advantage gets smaller if the market's smaller. Preventing vendor lock-in and ensuring the fate of your product isn't tied in with the fate of your company may be selling points.
So when the marke

Most open source business models that I have seen to date focus on support contracts and maintenance contracts for profit. That is if a user of you open source product needs support or wants a specific enhancement that is not part of the current project then a support and maintenance contract is negotiated in order to place effort on those enhancement requests. There are benefits to going open source such as lowering the cost of development since an open community of developers can place effort into the project. However, there are side effects that you need to look out for. Such as there is no guarantee that the open community of developers will work on enhancements requested by paying customers. These enhancements require that a paid development staff focus on those profit based enhancements to ensure delivery. In addition, project management of an open source project can be difficult since most poject managers are not typically trained to handle the management of open source projects.
I suppose the point I am trying to make is that like any business model, your revenue streams needs to be identified and allocated appropriately to ensure the success of your business. Open source is always an option but the ramifications of making your source code public should be considered carefully to ensure that it supports your current business model and/or can help refine or mature your business model into a more profitable one.

I'm not sure it's such a good idea to endanger your business's only revenue stream. How about you keep the source closed, but make sure the support you offer is excellent (i.e. implementation of new features on request, being responsive to bug reports and actually fix bugs for customers who have already paid, porting to new architectures when there's demand)? Also, have your customers actually asked for the source code?

You have to consider whether switching to a free-code/pay-for-support business model would actually be a good idea. Is the business as it is now growing or declining? Is your product a cash cow or is it becoming obsolete, unable to bring in the big bucks in the near future?

If you catch and sell fish, it's good for business to give away some fish now and then, but a bad idea to give away your fishery (except in 2048, when it'll just be a liability).

(Boy, I wonder how this will get modded. Disclaimer: I am actually pro-open source, and use Linux almost exclusively, and I've hardly ever touched atrocities like MSIE and XP.)

The open source model was developed primarily as a way to write good software. I think in most cases it does that well, but you have to remember that there isn't always a business case for it.
I am not a CEO/MBA/any other business-oriented TLA, but I see three areas where the Open Source model can be a viable business case:You have a lot of customers who pay for support - this seems to be the most touted business model. Give the software away for free, then sell support for it. This generally requires a pretty large user base to profit from though, because you have to make enough from support to cover the cost of developing the software.You have customers with very specialized needs - this is basically the consulting model. You can use an open platform as a springboard for building custom solutions for your clients. This generally works well when you have large clients who can afford consulting fees, and it works best for things with a very large scope.You Open Source the Product to buy Goodwill - basically if you have some software that isn't a huge source of income, you can make a business case for open sourcing it as a way to get good will from the community. Good will counts for a lot, but it can't replace your primary revenue stream.
From what you describe, your product doesn't really fit into any of these main categories. This doesn't mean that you can't make money by open sourcing your project, but the odds are probably stacked against you. If your company is interested in open source, you may consider looking at building porting your application to sit on top of a completely open stack of software.
I know a lot of people on slashdot tout open source as a magic bullet to solve business problems, but in the long run it's only going to give open source a bad name if people aren't honest about when it is a good solution, and when it isn't.

Pretend in every way that the software is not open source and people will start see no difference, except perhaps that the open source quality is higher... which is debatable...

Don't obfuscate the product with geeky crap like, "this program is a java program that is thread safe." No one cares unless they're a developer and even still you'd be lucky if they cared. Keep it simple. Say what the product does and why it's good at it (as in design, not ideology!) and let it speak for itself.

Just because it's open source doesn't mean you should be given a medal and a paycheck...

If, however, you're like 99% of companies out there and make your money from selling support, opening your source code will not change the bottom line one bit.

Except now a competitor can also sell support of your software and undercut your prices. Since they are now selling the exact same software, your only selling point is your understanding of it. And when you split to form your own company (or any other senior engineer), that competitor now has potentially more of that than you do!

However, as rights holder you can relicense different versions and plugins how you like; including, and up to closing the source to new versions in the future, or producing proprietary closed-source plugins for your otherwise open-source application.

Provided company ensures you retain the copyrights, I.E. requires contributors to assign their rights back, which is fairly common practice among major companies producing open source products, anyways, the maker can then do anything with the software they

The benefit of open source is having a community of developers who will improve on the product. If you have a small user base then you may not have that community of developers. The result is that you have given your product away for free, you can't afford to improve it and nobody else steps up to the plate. It's a lose-lose situation.

Even ESR admits that there are situations where open source makes no sense. Yours sounds like one of them.

Well, I hold a similar opinion to the US Government, until there is more than one supplier for X, it's never going to be sensible to go with X over something else for which there is already multiple suppliers. I'm sure a lot of other people share this opinion, so opening your software so that more than just your company can provide support for that software is likely to result in a huge increase in your market.

Thats literally just it. How do you make money from a web site? I mean, the client has all the source, and can do whatever with them, no? (well, copyrights and all, but its still open source, and you sold it to them, so...). Its a bit like that.

Best case is probably an ERP system. Often with those, especialy for smaller companies, there isn't a very easy way to install them or configure them (which is where small ERP ISVs get their money). So even if its open source, who cares, they don't do anything with it. But the benifit is still there (if you go under, your customer isn't screwed).

Its pretty much the best of both worlds. Any business based mostly on services can do fine with open source. When the software -itself- is the product, you start having issues.

If you can get per project sponsoring for your development then it may make it worthwhile.

There is a company in Sweden that does Open Source haptics [wikipedia.org], sensegraphics [sensegraphics.com] they occupy a niche but open source their API. This has allowed them to become a base for others to develop software on around the world. They make their money from creating products on top of the API for others.

It can be done, but if you guys make more from selling your product it may not be worthwhile.

1) Develop awesome code (this can be hard so I recommend you buy some other companies awesome code).2) Patent awesome code3) Cross-license awesome code with IBM and allow IBM to include the code in Linux4) Sue IBM and the Linux Pirates for infringing your copyright and patents.Now what may happen here is that IBM might tell you that it's not really your code in Linux, this is obviously akin to the Chewbacca Defense. You must immediately then subpoena IBM for every line of code they ever wrote. IBM will li

Simple. I run my company on open source software. The software costs me no money. The services I sell bring in money. Profit!

As for making a profit from _writing_ open source software; that's a little harder. I could see the software being a loss leader for selling other things, like manuals or support contracts.

If you want to make a profit purely on writing the software itself, you will have to find one or more parties who are willing to pay for development and accept that the code they paid for may be used by others. Given that the others might contribute improvements, this may actually be an advantage, so you may be able to find such parties.

I saw Ethan Galstad talk about his experiences with quitting his day job to run Nagios development. He was an incredible speaker, very motivational. I tried to convince him to write a book about it, actually. He seemed very approachable, so I would just email him your specific questions.

The big issue with GPL in certain business situations, is not that the user can do anything with the code. Thats not a problem. The big issue is that others can resell it. So you sell it to one person, then that person, technicaly, can steal all your customers.

So you really need to have a business model that doesn't revolve around the software sales, but around the services, otherwise you're pretty screwed.

Possibly they are looking as saving time by using open source components. Given though as it sounds like your developing for a niche clientel open sourcing your software isn't going to hurt them in the least bit. Whos going to take their software and modify it for their clientel for free? Noone.I'd say to original question, feel free to open source I if your in an obscure area its not really going to hurt you, you can still sell your programming and support services. But if there is no good reason besides w

It just says you can't put restrictions on how they use it or the code.

Restrictions such as those embedded in copyright (et al) law precluding your competitors from taking your entire product and selling it to your customers for less than what you do. An Arbitrage opportunity briefly exists until the price of the software reaches zero and you start selling support.
I guess it depends how you define 'they'...

I call BS on this comment. Sure you can sell your OSS. You just have to be the best provider of appropriate updates/features, so that any attempt at forking your project is met with failure, or at worst, limited market share.

Just don't overprice your new product/releases/features to the point which would encourage forkers to compete.

Exactly. Unless you have some real reason for changing it to Open Source, it sounds like a really bad idea.If you just want some warm fuzzies, instead I'd suggest you help out by working on Open/Free/NetBSD or Linux, or Apache, or one of any number of OS tools you might use around the company when you aren't coding on your proprietary product. Work on the already open OS tool to improve it for your own use, as well as contributing back to the community. You can do that on the side when you aren't program

PyMOL has an Open Source tool, but the manual is not really free for use, although it's browseable online. Where I work, they wanted to use the software, and I realized that we really couldn't quite do it legally without buying a subscription, which I told the money people, and they ante'd up. This is a pretty good model--you want the stuff to be free for the people who can't pay, and there to be just enough legal nip to cause those who can pay to decide that it's more reasonable to do so.
http://pymol.sourceforge.net/ [sourceforge.net]

The problem of finding a business model which utilizes open source is presently confounding many companies, many of them very large ones.

Why do you 'like' Open Source, and what motivates you to release your software?

It's like the huge problem the RIAA and MPAA are having with filesharing, torrents, and DRM. The market (for better or for worse) is made up of humans. They behave rationally most of the time. They count the costs and make decisions based on perceived profit, etc. Economics.

But humans also behave irrationally. Sometimes closed source is a good idea, because humans are irrational. I think that's where I agree with you. For instance, if you own a business doing embedded programming for some boring widget, it would be difficult to gain a financial advantage by open sourcing your code and hoping the community would contribute.

However, humans also behave irrationally the other way. Take patent-holding companies like NTP [slashdot.org], for example, whose sole existence is to file suits based on their patent portfolio. The cost to our whole society of a patent reform is enormous, and possibly the only way we can move past such things as submarine patents and the fear, uncertainty, and doubt surrounding the Microsoft/Novell partnership.

Leaving the economics alone, there's an enormous sea-change happening here. Evidence includes the Microsoft/Novell partnership. If even the largest, most profitable company to ever exist is threatened by the Free Software Foundation (okay, I know that some would debate this, but for the sake of argument, think about this) -- then this could be very significant. I've heard it said by other/.ers that it has to do with the ease of copying bits. This is not the same as a brick-and-mortar store, and the RIAA's complaints of "stealing" become shades of gray.

But the change is more than just "a chicken in every pot / a source tarball for every binary."

Think about the implication of the internet, its ability to spread the information which is publicly available. More than that, the internet, and even slashdot, are places where useful information seems to rise to the top. Because most people are rational most of the time, the trolls and flamebait sink and information is distilled. Open source software existed before the internet, but without the community effect, its pace was measured in decades instead of weekends.

Open source, file sharing, slashdot and the other blogs, VOIP, IPTV, piracy, viruses, and so many other things are examples of this community. I'm really trying to avoid the buzzwords of the.com boom v1.0, but the effect is real and the benefits are worth pursuing.

I think the real question facing individuals, business, and governments is simply this: If we all actually sat down and traded what we have for no cost, so that we all had access to the same resources, what could we accomplish? Would we benefit? Or would the Kim Jong Ils of the world build a nuke and turn us all into flamebait?

Open Source is a development model (which, incidentally, requires a set of freedoms to be passed on to the user). The idea is to have a large community of casual developers (and, ideally, a smaller community of active core developers) who all provide a small amount of code in exchange for the ability to use the entire final product.

Free Software is orthogonal. It is the idea that every customer should receive a set of basic freedoms (such as the ability to modify the code, and to distribute derived works). This is good for customers, since if you go bust, they can hire someone to keep developing your code.

The real difference between the two is that the source code and rights for an Open Source application are generally distributed (to encourage more people to contribute) while a Free Software application only has these rights distributed to your customers (who may then distribute them to the world at large, but then they do it, not you).

From your perspective, making your product Open Source has the benefit of (potentially) giving you a bigger development community. The cost is that it makes it easier for your competitors to fork your code and make a competing product. The way to avoid this is to ensure that your developers know the code inside out and so your product will be better than a fork (and, thus, your support contracts will be more valuable). It would probably be a good idea to make your developers sign a non-compete clause so they can't go and keep developing the software for someone else.

Free Software is different. You give your customers more freedoms, but don't (as) actively encourage them to contribute changes back. This is almost certainly good for customers of an embedded software supplier, since it makes it easier for your customers to customise your software. The benefits would be that you could advertise easier-to-comply-with software licensing and ease of customisation. You would make money as you always did, as well as by selling your services for customisation ('support'). Customers would continue to use your services for customisation since you could have more experience with the code-base than anyone else, but you could sell a freedom from vendor lock-in as an advantage.

Correct. I wasn't talking about Open source, I meant open source. Basicaly, even though its not an "Open Source approved license", your customer has the source, and they can do what the hell they want with it.

So from a business point of view, it has very similar drawbacks: unless you restricted things in the contract, your client can turn around, tell you to f*** off, and hire someone else to work with the code, resell it, whatever. So the business model will have to account for similar potential issues.

Open Source does not mean Free or free. You can release the source to your customers without giving your customers the right to redistribute it or their changes.

Your customers could benefit from this because they could make any customizations they want to the program -- which may not be possible with your competitor's product -- and because if there is a bug in your program which they must have fixed right away and they have the ability they might be able to fix it themselves faster than you would fix it.

You benefit because your customers might give you that bug fix so you'll incorporate it in new releases, and you'll have a competitive advantage over other vendors who don't release the source code.

If your customers redistribute the code, it is piracy, just like if they redistributed the compiled program.

From http://www.oreilly.com/openbook/freedom/ch01.html [oreilly.com]:
[person] himself had been of the first to identify the problem and the first to suggest a remedy. Years before, when the lab was still using its old printer, [person] had solved a similar problem by opening up the software program that regulated the printer on the lab's PDP-11 machine. [person] couldn't eliminate paper jams, but he could insert a software command that ordered the PDP-11 to check the printer periodically and report back to the PDP-10

The parent is actually quite insightful. I once worked for a small company ( 10 employees) that developed security software based on LGPL code (GUI/IO were proprietary).I came to realize that much of the IO portion of the software would eventually be developed by MS (probably with Vista) and our work would be unnecessary.

The trick with the remaining components was that some were really hard to configure properly (due to the problem's complexity and not just our software). And we could sell our expertise a

OK, so your boss has heard the phase "Open Source" and wants to get in on the new movement. This sounds like a really bad way to run a business - on the latest fad.Actually, what you are describing, as others have pointed out, doesn't sound like a very good fit. Probably the best way to make a profit from Open Source is to have the software be so incredibly arcane and poorly written that it is utterly unreadable to anyone that hasn't spent months tracing through it. Then it will be obvious to even an exp

I've thought a lot about this topic and I have not been able to find a working business model compatible with open source where there has been a significant loss lead. If you have already spent a lot of money (i.e. more than say $20,000) it might be difficult to recoup that expense. Most free software business models have you getting paid for the work that you do, so once you get significantly in the hole it's tough to dig yourself out. Your profit margin on the new work (whatever it is you do) will be t

The second set of question marks should be above the Collection of revenue. The second step is to market your services properly.
1. Don't spend money on software
2. Spend money on marketing
3. Collect Revenue for your services
4. Profit?

The previous answers did better than I could at explaining the *real* issues related to moving your business model to open source.

I wish to address some implicit issues based on my inference that your boss went to school for his MBMA (management by magazine article).

Business ModelThe recognized expert for businesses run with philosophies similar to your boss's is a brilliant business writer named Scott Adams. He has compiled thousands of case studies from the highly successful engagements of Dogbert Consulting. I think that these case studies would be highly instructive for your boss. If you're worried that perhaps your boss would be uncomfortable using case studies from a book of cartoons, you could simply cut and paste the cartoons from one of Mr. Adams's books and place a cover from Harvard Business Review on them. Trust me; it will sell.

MarketingAlthough some conservative businesses would actually prefer the painstaking approach of building true relationships with their customers (as well as prospects) and... oh, I don't know... maybe talking to them about issues in order to form a marketing plan; I suspect your boss would be more comfortable with the Clippings model. The Clippings model is very similar to the approach I suggest for your business model, but a bit broader. Rather than limiting yourself to the writings of Mr. Adams, simply Google terms such as "customer focus", "digital marketing", and the like; then paste as many paragraphs (random order should be fine) into whatever strategy document you need to support your boss. If you really want to tighten it up, do a boolean search and make sure "open source" is included with every search term. The key to the successful Clippings approach, as every experienced corporate staff member knows, is not completeness or even accuracy of the search. Heck, it's not even all that important to spell check it. No, the real secret of a successful Clippings project is formatting. Choose the right fonts. Add some color graphics. Pay attention to these important details, and your boss will find you indispensible.

Cut and RunNo, no; nothing to do with politics or current events. No; this important third issue is for you personally. You should have ample time to see the train wreck coming, and this is simply my personal advice to you, before the trains actually collide.

My employer makes an appliance product that includes quite a bit of open source software, including FreeBSD, Apache, PostgreSQL, Perl, PHP, all the usual networking stuff. We contribute code, testing, and bug fixes to several projects related to our business, and donate hardware and sometimes travel money to conferences and other efforts.How do we make money on that? We sell an appliance, and it comes with a subscription for services and data. We sell the hardware a price point that doesn't pay for the s

You missed dual-licensing, probably the most successful business model (MySQLAB, Trolltech,...)

Writing books, other forms of support than just tech support (training)...

One idea is to just sell copies of the software. Offer indemnification of some sort (ala Novell or Montavista)... this goes a long way with lawsuit fearing corporate customers. I guess in this business model you're actually an insurance company.

It worked for AMD. When the Opterons came out, which were the true "bread and butter" that finally put them into the black, Microsoft (in deference to Intel) delayed their 64-bit version of Windows for a loooooong time. When the chips were introduced, the only OS that provided 64-bit support and the high-quality NUMA support that really let them shine was Linux, and Linux carried the Opteron for a year or two.

That may be good advice. I'm not going to comment on that.You're flat-out wrong to say that you're giving anything away for free. It is entirely possible to sell open source software without making the sourcecode available for download to absolutely everyone. Now, the last time someone tried this, retards like the (anonymous) parent decided that they were breaking the GPL and cracked into their servers to get the source code, generally harassed the fuck out of them because people have this idea that GPL==fr

Err, whoops... Let me elaborate. Qt is not exactly analoguous of the nature of license agreement I had in mind, but the premise is close enough. Simply charge support for customers that want support and charge only for utilizing the application towards the development of a product. This will allow your source to be distributed freely to anyone that wants it. To use it to aid in the creation of product, good, or service that can be sold for compensation, namely for the purpose of receiving some monies, g

They lost $12,000,000 2006 3Q. They lost $10,000,000 same time last year. They're bleeding money very fast now. The only reason they can survive is because they sold stock. Trolltech is doing very badly, financially speaking.

Apple has been very successful at combining open source and proprietary software: they use the community to build the commodity support. For instance WebKit is largely KHTML, but people who use Safari don't know and don't care. Apple concentrates on making the software easy to use for the end user.

Trolltech, MySQL, Artifex etc have been very successful at building a base of customers (programmers) with their open sourced products. They realize that end user software cannot easily be sold as open source, s

Open Source does not mean Free or free. You can release the source to your customers without giving your customers the right to redistribute it or their changes.

But then it would not be open source.

Sigh. The term "free software" was a bit problematic, because people confused it with "gratis" software. So a bunch of well-intending players who *sold* free software, centered around Cygnus, sat together and invented a new term, with a precise definition: "open source".

This is a big gamble.Open source technical primadonna customers (majority of users) will use your software, not contribute anything and also not pay you for support. No profit.Many IT Directors still equate open source as free (as in beer). No profit.

In short, you could have left point 3 as just a "?" and saved typing profit.

The majority of the value in open source are by the users, not by the creators.So while the title of the posting was right on with "How Do You Make a Profit While Using Open Source?", h

The way to survive as a free software developer on a vertical market is to only write the code people pay you to write. Don't write the code, publish it as free software, and expect to be paid for it later.

It is a mindset question, you aren't getting paid for your code anymore, you are getting paid for your work. So don't work unless you get paid.

I consider this a very important Ask the 'Dot question. If we peruse the usual gamut of feedback, we jump all over the industrial examples of Vendor LockIn and the evils of closed source. I presume his boss likes Open Source because of all the types of benefits mentioned elsewhere when the topic comes up.The very real problem is exactly the one being investigated here. "How do I pay This Month's Mortgage long enough for the nebulous benefits of Open Source to appear?" I don't have a surefire answer either.

Lots of companies are garnering interest in their software by having an open source tier and then a tier with more features in it that costs money. This increases interest and customer base size at the low end, possible eating into some low-end sales, but appears to be creating more high end customers to offset that loss for the vendors who are doing it.

Sell support. If you want to sell your product per see, then you can't go Open Source.

Not entirely true. The product may have to be customised for specific customers. The company I work for built an Open Source CMS, and while everybody can download it for free, most customers prefer to hire us to install it, build a website for it, and customise the CMS for their specific purposes. It's a bit on the borderline between selling a product and selling support.

I really hope they're not considering releasing it under the GPL. That'll make it pretty much unusable for most embedded applications. If I link against some GPL'd code, I'm obligated to release mine under the GPL as well. Speaking as an embedded guy myself, I've worked at very few companies which would even consider releasing their own source code.

There's more to open source than the GPL, though. "Open source" could just mean that you give the source code to your paying customers, not to anyone else,

First of all, I don't see how a person could want a good example (meaning advise) as long as that person is ruled by a boss. A person should not have a boss. Instead a person should, if possible, allow somebody to pay you to 'do want you want to do' because he or she wants to see what you do: take 'donations' (meaning payment for your work really).
O.k. if a person can attempt that first, the person should also 'be able' to and 'optionally offer' (person's choice) his or he

I'm not sure it's such a good idea to endanger your business's only revenue stream. How about you keep the source closed, but make sure the support you offer is excellent (i.e. implementation of new features on request, being responsive to bug reports and actually fix bugs for customers who have already paid, porting to new architectures when there's demand)? Also, have your customers actually asked for the source code?

Actually, going Open Source might open new revenue streams. Our Open Source CMS [hippocms.org] can b

Too many people (especially on/.) seem to think that Open Source means that your source code is available for all the world to share. Those people need to go re-read the GPL, which says that you must give your source to anyone to whom you sell your binaries. I've spent years re-selling the same OSS software to clients. The OSS license that I use says that they and I can do anything we want with the source code; I resell it to my next client, they stick it in a vault in case I can't or won't assist with

Open source is good to get new ideas into the software, and get them implemented quickly.
Open source is also good for competitors to easily copy your code and turn it into something better than you already have - give it another name and offer it to your customers.
Support is a great way of making money from your software, but making it open source can lead to other companies being able to offer support also.
Conclusion:
Open source is for very small operators who feel as though they are doing the worl

We've started as a 100% open-source company in a very small specialized market (translation agencies, ~5,000 companies worldwide), and found that it didn't work out. We didn't just earn enough money with services because few customers were willing to pay for services, and those who paid were small & cheap. So we had to develop some closed-source "extension modules"

Something to consider: Open-source your product and transition your company to be a consulting firm that specializes in working with your software.

When will such an approach be valuable? If the value of your software is incredibly low, but the value of the effort that goes into modifying it is high. You then make money by being the expert in a nitche field of modifying your software.

You mentioned that you're writing software for an embedded system. Is it your own hardware you're selling? If so, open sourcing your software -- or a version of your software -- could be a big win. Here's how: One of your customers has been bitching to himself that your product is pretty good, but really wishes it could _________. Now he has the source code, and he rewrites some drivers and now your product has a new feature. And everybody in your market says, "Holy shit! You mean it can actually ___